By Berger, Barrie Tabin
Government Finance Review , Vol. 25, No. 5
Graham County, North Carolina, has asked the U.S, Supreme Court to review an issue that will have a substantial impact on local government exposure to damages.
The Government Finance Officers Association (GFOA) joined several of its sister groups - including the National League of Cities, the United States Conference of Mayors, the National Association of Counties, and the International City/County Managers Association - on an amicus brief to the U.S. Supreme Court in support of the position of Graham County, North Carolina, in the case of Graham County Soil & Water Conservation District v. United States, ex rel. Karen T, Wilson. The amicus brief was drafted by the State and Local Legal Center, an entity created in 1983 by seven of the national associations representing state and local governments.1
In this case, the county has asked the court to review an issue of critical importance to local governments. The case involves language in the federal False Claims Act that will have a substantial impact on local government exposure to damages. To police the use of federal funds by local governments and prevent or limit fraudulent activity, the False Claims Act permits a private individual to bring a cause of action against a locai government for damages for the misuse of federal funds so long as the individual did not discover the misuse of such funds through publicly avouable information. Damage awards under the False Claims Act are often for millions of dollars, and actual damages allowed by statute are often tripled. The federal government receives most of the damage award, but the private individual who brought the action also receives a sizable portion of the recovery.
The question presented is whether a state or local government's own audit investigative report regarding the misuse of federal funds by a local government qualifies as an administrative report under a provision of the False Claims Act that precludes the use of such audits or reports as the basis for False Claims Act lawsuits. The provision at issue in this case bars suits that are based on public disclosures - where the federal government already knows or has the opportunity to know about fraud against it, and thus does not need private citizens to police fraud through private actions. The act states that no federal or state court can entertain a False Claims Act action "based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accountability Office report, hearing, audit, or investigation, or from the news media..."
In this case, the plaintiff received her information in part from a state audit report and in part from the local government's own audit report.The plaintiff argues that a lawsuit under the False Claims Act is permissible because the public document that reveals the information - the misuse of the funds must be a federal administrative report to preclude bringing the action. …